$4 Billion Worth of Temptation

In dollar terms, the largest civil rights effort run by the Federal Government is the set-aside programs for minority-owned businesses. In 1986 more than $4 billion in federal contracts was allotted to such firms, and enthusiastic support for the programs cuts across the ideological spectrum, from Ronald Reagan to liberals in Congress. The political appeal of this kind of compassionate capitalism is almost irresistible: fostering entrepreneurship among blacks, Hispanics and other minorities with dollars the Federal Government would have spent anyway.

Good intentions, however, are rarely enough, especially when billions of dollars in contracts are being awarded free from the pressures...